The family of a 20-year-old man filed a lawsuit against the investment app was responsible for the student's suicide.on Monday, saying its popular investment
Alex Kearns, who was studying at the University of Nebraska-Lincoln, killed himself last June after he believed he had racked up roughly $730,000 in trading losses on the app. The distress caused by the apparent loss and automated responses from Robinhood prompted Kearns to take his life, the lawsuit says. The family is suing for wrongful death, negligent infliction of emotional distress and unfair business practices.
"This case centers on Robinhood's aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits," read the complaint, filed Monday in California state court. "Robinhood built out its trading platform to look much like a videogame to attract young users and minimize the appearance of real-world risk."
The lawsuit comes amid a swirl of controversy involving Robinhood, which was at the center of the bizarre GameStop saga that captivated financial markets earlier this month as shares of the video game retailer, cinema chain AMC and BlackBerry surged wildly and crashed. The fee-free service, which came under fire for limiting trades in some of those shares during the volatile market, had previously been accused of and presenting complex financial instruments like a game in its effort to draw in young people and new investors.
Robinhood CEO Vlad Tenev isbefore the House Financial Services Committee on Feb. 18.
When reached for comment, Robinhood didn't directly address the lawsuit but said it's improved its customer service, offering live voice support and a process for escalating customer requests. The company has also added more guidance and requirements for those seeking to trade options, a form of more complex financial instruments.
The lawsuit against Robinhood was earlier reported by CBS This Morning Monday.
On June 11, Kearns purchased multiple stock options via the Robinhood app that resulted in what appeared to be a negative balance of $730,000. Kearns tried contacting Robinhood customers service via the app but received only automated responses. The day after his suicide, an email from the company said his trades had been resolved and he didn't owe any money.
"How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?" Kearn's suicide note read. "The puts I bought/sold should have canceled out, too, but I also have no clue what I was doing now in hindsight. There was no intention to take this much risk. "